2nd Charge Loans Easier for the Self-Employed

Adam Brand Adam Brand | Operations Director

It has always been more difficult for self-employed people to get a mortgage as compared to salaried employees. For that matter, 2nd charge loans have historically been somewhat harder to obtain for the self-employed as well. At the heart of the issue is a tendency among self-employed individuals to not be able to satisfy loan officers looking to placate their own fears that the borrower will not be able to make good on his or her loan. The good news is that things are changing â?? at least where 2nd charge loans are concerned.

Loan Talk, an online publication serving the 2nd charge industry, recently conducted a survey among self-employed borrowers to gauge their view on 2nd charge lending. Approximately 78% of respondents confirmed that 2nd charge loans are now competitive enough to make them worthwhile; 22% disagreed.

The survey tells us something important. It tells us that consumer perceptions of 2nd charge loans are improving among self-employed people. That's no accident. If perceptions are improving, it's because people looking to borrow are getting better products, better rates, and better service. It is an indication that the 2nd charge market is responding positively to the needs of the self-employed.

Changing the Way They Do Business

Loan Talk explains that lenders are changing the way they do business in order to better serve self-employed applicants. For example, one specialist lender indicated that it had reduced its tax calculation requirements while others are changing their income criteria to make it easier for borrowers to document their income.

Second charge lenders can do a lot more to help the self-employed than primary mortgage lenders because they have more flexibility. They are finally taking advantage of that flexibility to find ways to better serve self-employed borrowers. Even more encouraging is the fact that lenders are coming up with specialised products to account for the wide variety of self-employed workers and their circumstances.

Clever Lending managing director Sam Kirtikar went so far as to tell Loan Talk that he expects lenders to continue to pursue a strategy of â??softening their lending approach to the self-employedâ??, thereby resulting in new products being offered to win their business.

It Really Pays to Shop

The Loan Talk survey is excellent news for self-employed borrowers who need financing. It is also an illustration that now, more than ever, it really pays to shop. A good way to look at it is to compare what's now happening in the 2nd charge market with what happened in the buy-to-let market just a few years ago.

Lenders discovered in the years following the financial crisis that buy-to-let investing was attracting a lot of people. They began competing aggressively with the understanding that the buy-to-let market was likely to grow. They were right. Buy-to-let mortgages went on to become one the hottest financial products in the UK.

Right now, there is a similar scenario brewing for 2nd charge loans for the self-employed. As the number of self-employed people increases, the need for lending tailored to their circumstances is also growing. Now lenders are beginning to realise that they need to start working on figuring out how to attract a new wave of self-employed borrowers.

It is quite likely that market competition will produce a plethora of new 2nd charge products for the self-employed. Look for competitors to find ways to make it easier to apply, easier to qualify, and easier to repay 2nd charge loans. It is now a borrowerâ??s market while banks, building societies, and specialist lenders compete to see who will rise to the top.

Sources:

  1. Loan Talk â?? http://www.loantalk.co.uk/article-desc-2208_78-believe-self-employed-2nd-charge-products-are-competitive#.V9rccmKgqV5

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